In Bates v. Coronado Beach Co., 109 Cal. 160, 163, 41 P. 855, 856, the court said: "Whether a contract is `essential' to the transaction of its ordinary affairs, or for the purposes of the corporation, is to be determined by the corporation, or those to whom the management of its affairs is intrusted.Summary of this case from Modoc County Bank v. Ringling
Hearing In Bank Denied. Beatty, C. J., Dissented from the Order Denying a Hearing In Bank.
Appeal from a judgment of the Superior Court of San Diego County and from an order refusing a new trial. George Puterbaugh, Judge.
Gibson & Titus, for Appellant.
Clarence L. Barber, and J. W. Hughes, for Respondent.
JUDGES: Harrison, J. Garoutte, J., and Van Fleet, J., concurred.
The facts upon which the plaintiff seeks to recover are stated in the opinion upon the former appeal herein. (Bates v. Babcock , 95 Cal. 479.) Upon a retrial of the cause after it had been remanded, a nonsuit was granted as to the defendant Babcock, and judgment was rendered in favor of the plaintiff and against the appellant.
The court found that the plaintiff and the appellant entered into a contract February 23, 1888, by which it was agreed that they should purchase certain lands and other property from the Millers, sell the same, pay certain debts and encumbrances thereon, and divide the profits and losses arising therefrom equally between them. This was the main issue upon the trial in the superior court; and, as the evidence on behalf of the plaintiff was ample to sustain the finding, the conclusion of the court must be accepted as determinative of the issue. The conclusion of the court is not overcome by the evidence to the effect that Babcock, who acted in behalf of the appellant, refused to have the contract put in writing until the plaintiff should obtain a certain release from the Millers. It was not one of the terms of the contract between the plaintiff and the appellant that it should be reduced to writing and signed by them, but, after they had made the contract and agreed upon its terms, Slaughter, an attorney who was present at the negotiation, offered to put it in writing, but Babcock replied that he did not want a written contract at that time. Both of the parties to the agreement immediately entered upon its performance, and carried it out according to its terms. The plaintiff gave to the defendant the fifteen thousand dollars which was his contribution to the venture, and transferred the title to the land then held by him to the person designated by the [41 P. 856] defendant, and the defendant disposed of the money in discharging obligations upon the land, and afterward disposed of the land. Under these circumstances it cannot be held that it was the intention of the parties that the agreement should not be operative until it had been reduced to writing, or that the omission to have it formally executed deprived the plaintiff of the rights acquired thereby.
The court was justified in finding that Babcock was authorized to make the contract on behalf of the appellant. It was alleged in the complaint, and not denied, that Babcock was the president and general manager of the appellant corporation, and it fully appeared from the evidence that he had assumed the management and control of the general business of the appellant with full knowledge and acquiescence of its officers, and that at a meeting of its stockholders, held subsequent to the making of this contract, all of his acts were ratified and confirmed by them. Irrespective of the estoppel upon the appellant arising from the advantage derived by it from the full performance of the contract on the part of the plaintiff, these facts make the acts of Babcock in entering into the contract binding upon the appellant. (Crowley v. Genesee Min. Co ., 55 Cal. 273; McKiernan v. Lenzen , 56 Cal. 61; Seeley v. San Jose etc. Co ., 59 Cal. 22.)
It was not ultra vires for the appellant to enter into the agreement with the plaintiff. The power of a corporation to enter into a general partnership with an individual, or with another corporation, is not here involved. The ground upon which this power is sometimes denied is that a partnership implies the power of each partner, under his authority as a general agent for all the purposes of the partnership, to bind the others by his individual acts, whereas the statutes under which a corporation exists require its powers to be exercised by a board of directors, and preclude it from becoming bound by the act of the one who may be only its partner. There is, however, in the present case no question of agency in the management of the affairs of the corporation. The plaintiff paid the money to the appellant, and transferred to its appointee the title to the land, so that the entire management of the business contemplated by the contract was intrusted to the corporation itself. There is no rule of law that will preclude a corporation from entering into a contract with an individual, which will have the effect to carry out directly or indirectly the object of its incorporation, and to provide in that agreement that the gains or losses of the venture shall be borne equally by both parties. Section 354 of the Civil Code provides: "Every corporation, as such, has the power:. .. . 8. To enter into any obligations or contracts essential to the transaction of its ordinary affairs, or for the purposes of the corporation."
Whether a contract is "essential" to the transaction of its ordinary affairs, or for the purposes of the corporation, is to be determined by the corporation, or those to whom the management of its affairs is intrusted. If it is within the apparent scope of its organization, the fact that the contract has been entered into by it, or by its representative, is a determination on the part of the corporation that it is essential, and the corporation will not be permitted thereafter to question its effect. The appellant was incorporated for the purpose, among others, of selling or otherwise disposing of the lands upon Coronado beach, in blocks or lots. It had conveyed the lots in question to the Millers, and held mortgages thereon to a large amount. The property was encumbered with other liens; there was a possibility that insolvency proceedings would be commenced, either by or against the Millers, by which the securities held by the appellant would be impaired; the real estate market was inactive, and, as was soon ascertained, was in a falling condition; creditors were pressing their claims against some of the property, and the appellant was anxious to have the property disposed of, in order that it might be freed from these obligations. Under these circumstances, it must be held that the contract was not only within the scope of its organization and essential to the transaction of its ordinary affairs, but that it was a prudent step on the part of the appellant for preserving the value of the securities which it had taken upon its sale of the lands.
The relation existing between the plaintiff and the Millers, at the time of entering into the agreement, cannot be made by the appellant a ground for repudiating its contract with the plaintiff. If it be assumed that, in making the contract with the appellant, the plaintiff violated his obligation to the Millers, that was a matter for which he was liable to them alone, and from which he could be released by them. After the contract between the plaintiff and the appellant has been fully executed without any objection on the part of the Millers, the appellant cannot allege the possibility of an objection on their part as a defense to its liability for its share of the losses, any more than it could have alleged such matter as a defense to the plaintiff's claim for his share of the profits, if there had been any profits realized from the venture.
Several rulings of the court during the progress of the trial are assigned as error, but none of them seem entitled to any extended consideration, nor could a different ruling upon the respective matters have changed the conclusion of the court.
The judgment and order are affirmed.